Costa Rica's second-round presidential run‑off is set for April 1st. Concluding a campaign that has proved extremely polarised, the run‑off will feature the two presidential candidates, Carlos Alvarado Quesada and Fabricio Alvarado Muñoz, with the most divergent views on a landmark ruling in favour of same‑sex marriage, made by the Inter-American Court of Human Rights (IACHR) in January. Both of the campaigns have sought to bolster support by upgrading their economic proposals; however, concerns remain about both candidates' ability to address pressing issues, including a deteriorating fiscal situation, rising criminality and infrastructure deficiencies. The Economist Intelligence Unit believes that Mr Alvarado Quesada of the ruling centre-left Partido Acción Ciudadana (PAC) is best placed to secure the presidency by a slim majority, on the assumption that voters plump for his more sensible policy mix and his greater capacity to build cross‑party consensus, but there are strong risks to this forecast.

Mr Alvarado Muñoz, of the evangelical Restauración Nacional (RN), rose from relative obscurity to victory in the first round of the election in a matter of weeks as a direct result of his opposition to the IACHR ruling (he even threatened to pull Costa Rica from the Organisation of American States—OAS—if necessary, to avoid abiding by the ruling), obtaining 24.9% of the vote. Mr Alvarado Quesada of the ruling PAC, who has an open stance towards gay marriage, came second, with 21.7% of the vote. According to the latest survey by the Centro de Investigación y Estudios Políticos (CIEP), a local pollster, the two candidates are in a technical tie, with 43% of voters supporting Mr Alvarado Muñoz and 42% backing Mr Alvarado Quesada.

Revamped economic policies

Mr Alvarado Muñoz's economic policies were initially unclear, whereas Mr Alvarado Quesada represented continuity with the current government's economic policies, which have proved insufficient to narrow the growing fiscal deficit. In order to capture voters from losing parties in the second round, in particular those who backed the centrist Partido Liberación Nacional (PLN) and the centre-right Partido Unidad Social Cristiana (PUSC), both candidates have needed to broaden their political base and adapt their economic proposals.

Although neither candidate has managed to sign any formal alliance with other parties, several political figures have publicly expressed their support for one or other of the two men. Mr Alvarado Quesada, for example, has announced a joint policy agreement with Rodolfo Piza, the former PUSC presidential candidate. The plan signalled efforts to address the question of fiscal consolidation more adequately and saw Mr Alvaro Quesada adopt a number of Mr Piza's policy proposals, including the transition from a sales tax to a value-added tax (VAT) at a top rate of 13% and the introduction of a public-sector hiring cap. Several members of the PUSC's former economic team have also joined Mr Alvarado Quesada's campaign, including a former head of the central bank, Jorge Guardia.

Meanwhile, Mr Alvarado Muñoz has also unveiled a team of top economic advisors and business leaders (mostly PLN figures), most notably Édgar Ayales, a former finance minister. Mr Alvarado Muñoz's economic team has mostly been well received by the private sector; however, his advisors hold some conflicting policy views and, in the absence of a concrete economic plan (Mr Alvarado Muñoz promised to present his proposals only after the election), RN's economic policies are unclear.

Breaking the legislative gridlock

In legislative elections in February, RN obtained 14 out of 57 seats in the Legislative Assembly, and the PAC obtained only ten. Therefore, regardless of who wins the presidential contest, the next government will need to seek votes from other parties in order to enact policy. Although it suffered its worst performance in a presidential election in the first-round vote, the PLN remains the largest party in the legislature, with 17 seats. With the support of the PLN's legislative block, Mr Alvarado Muñoz would in theory be able to obtain a simple majority in the legislature, unlike Mr Alvarado Quesada, who would need support from several parties. However, any assumption that the PLN would as a group support a government led by RN is at best premature. Once in government, members of legislative blocks obtain a de facto independence from their parties, and almost no elected member of the next legislature, from the PLN or any other party, has given their support to either candidate. Moreover, the current election has inflamed intra-party divisions, meaning that many members of the PLN and the PUSC are unlikely to follow the party line.

In order to deal with such a fragmented legislature, the next president will need to engage in dialogue with all the legislative blocks in order to reach policy consensus. The winning candidate will also face an increasingly urgent need for fiscal reform, and the need for solutions to the country's infrastructure deficit, rising criminality and income inequality. The victor's ability to secure policy approval will be key in all these areas (and therefore crucial to Costa Rica's growth outlook).

Mr Alvarado Muñoz's rise to prominence was fuelled by the divisiveness of his positions, and this, together with doubts over his ability to transform a surprisingly successful campaign into strong leadership in office, make him unlikely to successfully negotiate lasting alliances. Although Mr Alvarado Quesada, by contrast, has a smaller legislative block at his disposal, his establishment of a "national unity pact" with Mr Piza suggests that he would be much more likely to reach cross-party agreements.

Policy concerns

Although Mr Alvarado Quesada's new economic proposition has been well received by business sectors, concerns surrounding some aspects of his plan persist. The private sector has criticised the PAC's protectionism (Mr Alvarado Quesada indicated that he was against Costa Rica joining the Pacific Alliance, an integration project that includes Chile, Peru, Colombia and Mexico) as well as the party's links with unions. Given that Mr Alvarado Quesada's vice-presidential candidate is a union member, and considering that the current administration has had a lacklustre record on dealing with unions, some sectors fear that unions will successfully boycott fiscal consolidation policies. Mr Alvarado Quesada's presentation of new economic policy goals as part of his deal with Mr Piza calmed the nerves of many; however, the appointment of a fiscal hawk, such as Edna Camacho, the PUSC's former vice-presidential hopeful, as finance minister, would give much more certainty about Mr Alvarado Quesada's commitment to said economic policies.

Mr Alvarado Muñoz and his inner circle, composed of other conservative Christians, would manage most social policy in his government. Although ideas previously mooted by Mr Alvarado Muñoz's campaign, including gay-conversion therapies and Costa Rica's departure from the OAS, would be unlikely to occur, others, including the creation of a family ministry to police "family values", would be much more likely. In other areas, Mr Alvarado Muñoz himself appears so far to hold no strong positions. As a member of the Legislative Assembly for the past four years, he passed no meaningful policies, and his current proposals remain limited in most policy areas. This record, and his lack of a clear economic policy platform, suggest a strong risk of policy inaction if he is elected.

Testing institutions

Costa Rica has an open, diversified economy that is highly reliant on trade, tourism and foreign investment. Its strength comes from well-established rule of law, strong diplomatic soft power and the strength of the institutions that characterise a well-functioning democracy. There are some signs that institutions would be tested under an RN presidency. In recent weeks he has criticised bodies such as the CIEP, the Supreme Electoral Court and even INEC, the national statistics agency; he also called for the boycott a local newspaper, after it published a write-up on his pastor, raising a number of red flags with regard to press freedom and institutionality.

In this environment, and despite the fact that Mr Alvarado Quesada's platform has not addressed all voter concerns with a potential new PAC administration, we expect voters in a close race to pick him as the safer choice. We expect that Mr Alvarado Quesada will win the presidency on the back of his promise of a "national unity government", with better prospects for achieving cross-party consensus. However, the surprising success of Mr Alvarado Muñoz's candidacy to date suggests substantial voter discontent, which in turn raises strong risks to our assumptions. The result will be close.